After Obtaining an Understanding of the Entity's Internal Control and Assessing

question 40

Multiple Choice

After obtaining an understanding of the entity's internal control and assessing control risk, an auditor of a non-public company decided not to perform additional tests of controls. The auditor most likely concluded that the:

• A)additional evidence to support a further reduction in control risk was not cost beneficial.
• B)assessed level of inherent risk exceeded the assessed level of control risk.
• C)internal control structure was properly designed and justifiably may be relied on.
• D)evidence obtainable through tests of controls would not support an increased level of control risk.

---

Definitions:

Priced

Determination of the value or amount that must be paid to acquire a good, service, or asset.

Perpetual Bonds

Bonds that do not have a maturity date, allowing them to potentially pay interest forever, making them a form of permanent debt capital for the issuer.

Corporate Bonds

Fixed income securities issued by corporations to raise capital, promising to pay the bondholder a specified amount of interest over a specified period and to repay the principal upon maturity.

Real Return Bonds

Bonds that offer returns adjusted for inflation, ensuring that the investor's purchasing power is maintained regardless of inflation rate changes.